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Dalal Street’s most-favoured fund-raising instrument qualified institutional placements (QIPs), have staged a strong comeback in 2014. A sustained rally in the secondary market, robust flows from abroad and drastic improvement in investor appetite towards equity offerings have helped India Inc raise record capital through QIPs this year. Fund raising through this route had taken a beating in the past three years due to volatile market conditions.
Companies have raised Rs 31,000 crore through QIPs so far this year, nearly four times more than the last year. A total of 29 QIPs were launched by companies to raise fresh capital as against 10 last year. Average fund raising through QIPs in the past three years was only Rs 5,400 crore.
Investment bankers said a positive outlook for equities and availability of capital provided a needed window for companies across sectors to fresh funds.
“QIP is the fastest way to raise money. We have seen outlook for the equity market move from pessimistic to optimistic in a very short span. This suddenly provided an opportunity to companies,” said Arun Kejriwal, director, Kejriwal Research and Investment Service. “Next year, too, we will see a lot of companies raising capital through this route.”
Market experts said companies have raised funds through this route for expansion of business or for refinancing debt. A few companies from beleaguered sectors like infrastructure and real estate have also been able to raise equity capital this year—something which was considered near-impossible last year.
Debt-laden Jaiprakash Associates managed to raise Rs 500 crore. Real estate firms Godrej Industries and Prestige Estates have raised nearly Rs 400 crore each. Sustained rally has increased investor interest towards such issuances. Last month, Gammon Infra and Sadbhav Engineering raised Rs 250 crore each.
Companies have raised Rs 31,000 crore through QIPs so far this year, nearly four times more than the last year. A total of 29 QIPs were launched by companies to raise fresh capital as against 10 last year. Average fund raising through QIPs in the past three years was only Rs 5,400 crore.
Investment bankers said a positive outlook for equities and availability of capital provided a needed window for companies across sectors to fresh funds.
“QIP is the fastest way to raise money. We have seen outlook for the equity market move from pessimistic to optimistic in a very short span. This suddenly provided an opportunity to companies,” said Arun Kejriwal, director, Kejriwal Research and Investment Service. “Next year, too, we will see a lot of companies raising capital through this route.”
Market experts said companies have raised funds through this route for expansion of business or for refinancing debt. A few companies from beleaguered sectors like infrastructure and real estate have also been able to raise equity capital this year—something which was considered near-impossible last year.
Debt-laden Jaiprakash Associates managed to raise Rs 500 crore. Real estate firms Godrej Industries and Prestige Estates have raised nearly Rs 400 crore each. Sustained rally has increased investor interest towards such issuances. Last month, Gammon Infra and Sadbhav Engineering raised Rs 250 crore each.
The gain in share prices this year has helped. Share prices in most cases rose after the QIP issues provided a lot of comfort to investors to participate in these private placements,” said an investment banker, who didn’t wish to be quoted.
India’s benchmark BSE Sensex has gained over 30 per cent this year, while the broader BSE 500 Index has soared about 35 per cent, with every third stock in the index giving positive returns this year.
Foreign investors have pumped in around $17 billion into the stock market so far in 2014.
State Bank of India’s Rs 8,000-crore QIP in January this year was the biggest, followed by Rs 5,500 crore worth of QIP by private sector lender Axis Bank.
Bankers said lack of IPOs this year also favoured QIPs. So far in 2014, only five companies have come out with IPOs, which together have raised only Rs 1,200 crore.
“This year was full of QIPs. Next year could be a mix of IPOs and QIPs,” said the banker quoted above.
